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IT as a driver of M&A success - Bandwidth needed - EY - Global

IT as a driver of M&A success

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Don't underestimate the skill set and time needed to make IT work.

CIOs play a critical role is driving performance and change across a business. The skill set needed to deal with the risks and challenges posed by IT are very specific and deep. Within the transactions arena, extended IT skill sets to focus on supporting the overall business case for a deal.

Skills include:

  • Helping to capture synergies
  • Reducing the risk delays
  • Identifying IT capabilities to deliver and sustain growth

Only 20% of respondents recognized IT as one of the most challenging areas to deal with post‑-transaction. However, many of the problems encountered in other departments stem directly from IT problems.

In your experience, which of the following areas typically presents the most significant challenges post-transaction?


In your experience, which of the following areas typically presents the most significant challenges post-transaction?

Looking at pre-deal requirements and benefits, IT transaction skills help to form an objective view on the effectiveness of a target's IT landscape in a very short time and potentially with very little information. It helps to uncover which aspects of IT diligence need to feed directly to the valuation of the target.

Ultimately, when assessing the required skill set and time, it comes down to being able to ask the same question multiple ways to get to the answers and uncover issues that aren't necessarily obvious.

External expertise

Many respondents we spoke to — 53% of corporate and 60% of PE respondents — say they are likely to enlist third-party support post-‑transaction. The help required post-deal ranges from the strategic — one corporate respondent refers to "formulating a hundred-day plan" while another refers to "readiness for day one" — to project-specific, troubleshooting tasks, often centered on IT.

A private equity-operating partner based in the UK explains that third-party advisors came on board post-transaction to identify potential sources of value erosion, and found that IT issues were draining money from the business.

"Post-transaction, we were focused on driving sales growth — but what we did not realize was that the engineering of our IT system, or rather the over-engineering of our IT system, was incurring a lot of costs."

Did you enlist third-party help (i.e. financial, IT, operations) to support you post-transaction?


Did you enlist third-party help (i.e. financial, IT, operations) to support you post-transaction?

IT can address many of these issues if they are involved at the pre-deal phases but it is important to understand the unique skills required for this job. Corporate IT teams have functional and technical skill sets rather than transaction experience. Typically, they are not able to allocate resources for due diligence and transition programs on a full-time basis.

Bringing external parties on board early in the process can provide support, guidance and leadership from pre-to-post deal where internal knowledge may be lacking or directed to other parts of the deal.

Third parties can fill in gaps in internal IT team skill sets, including:

  • Ability to engage with the vendor and ask the right questions
  • Ability to form an objective view on the target's IT infrastructure, often under tight time constraints and with limited information
  • Knowledge of how IT due diligence feeds into the target's valuation, meaning a solid grasp of standalone cost dis-synergies, capex forecasts and inappropriate IT operating models


“IT always features as a significant part of the deal process. One of the biggest problems is that people who are used to a certain IT system will be reluctant to switch to a new one. This can cause major delays in realizing operational synergies, because it takes time to migrate to the new system.”

— CFO, leading European energy provider





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